Learning to Be Lean: 5 Lessons Coca-Cola Has Learned About Building Startups

Coca-Cola Co-Founders Ricardo Suarez (left) and John Cooper inside their Mexico City office.

(Photo Credit: )

Scale and agility. In today’s volatile and rapidly changing world,
these are two essentials that every company needs to grow and remain relevant.

Every big, established company is at risk of having a Kodak Moment: watching their
competitive advantages—the “moats” around their business—disappear seemingly overnight.
They have scale, but what they lack is the agility to adapt.

Startups have a different problem. All startups have nothing but agility. What they need is scale. Trying new business models, repositioning
their brand, and developing new products within weeks or even days—things big
companies can only dream about—is not a problem. But building the right team, connecting
with the right strategic partners, securing the right funding and scaling into the
right markets are what keep most founders up at night.

In 2013, Coca-Cola launched the Coca-Cola Founders platform—a new
model for creating seed-stage startups. First, we partner with experienced
entrepreneurs around the world. Then we unlock the “power of Coca-Cola—our relationships,
resources, and reach—before the
startup. Founders have a launch partner in Coca-Cola from day one.

The model attempts
to create a win-win for everyone. Founders are given an unfair advantage
through the power of Coca-Cola to help them scale. And Coke gets early
access to new, fast-growing markets and solutions to challenges impacting our
business.

We’ve learned a lot from building startups. For the past year or so, we’ve been in “stealth mode,” releasing very few
details about the new platform until now. We’ve spent the last two years experimenting and learning.

One of the most basic things we learned was an expanded definition of
the word “lean.” Most people understand that lean has something to do with
“less,” as in doing more with less or being more agile. But in the startup
community, “lean” means two things: moving at maximum speed and eliminating waste.
This is quite powerful. Doing more with less is not a new idea for most big,
established companies. But a relentless focus on eliminating waste at startup
speed is very different for most.

Co-founders pitch the 'one metric that matters' for each of their startups to the network during a summit in Berlin.

In our journey to create lean startups, we’ve learned many lessons.
I’ll focus on five that have really made a difference:

1. Building
startups requires new systems, skills, and structures.

Large, established companies are designed to execute, not explore. One
way successful companies stay that way is by putting the right systems, people
and structures in place to flawlessly execute their business model at scale.
With this focus on efficiency, there’s little room for experimentation and
exploration; it’s all about execution. This is the best way for companies to
keep operating expenses low and margins high, creating higher profits.

Startups are designed almost exactly opposite. They are designed to
explore and experiment constantly. This helps them find a business model they
can repeat and scale. In fact, the life of a startup includes thousands of
tests to not only build a product, but even before that to validate the problem
they’re trying to solve. This requires a massive amount of speed and flexibility
that doesn’t fit in most big companies’ normal way of working. So we had to
design a completely new operating model built around the founders’ needs and
the way they work, not Coca-Cola’s. Big companies can’t just decide one day to
“do what startups do.” It’s a structural thing—companies have to actually design
the right structure to get the kind of behavior and results they’re looking
for. That’s a huge hurdle for most established companies, including ours.

2. Start with
problems, not ideas.

“How do you know which ideas to invest behind?” That’s basically the
first or second question most people ask me. But a lot of the time what most
people call “ideas” are actually solutions—solutions sometimes in search of a
problem. Staying focused on the problem is one way startups stay flexible. At
the end of the day, they are trying to solve a big problem a lot of people have,
not design an app.

Inside large companies, it’s easy to fall in love with a solution
rather than focusing on the problem itself. But this can be a black hole. What
looks and sounds like “innovation” can often lead to months or even years of
wasted time and money. We designed the Coca-Cola Founders platform to always
start with a big Coke challenge and then connect the challenge to a larger
problem with a big market around it. This ensures that the value of the solution
can flow back to Coca-Cola as well as hopefully create a big business for the
founders.

3. Launch, then
plan.

Creating a business plan is not new. Every MBA student, manager or
entrepreneur understands that you need a plan to run a business. The plan is
the roadmap, the thing that gives direction to the team and allows everyone to
track progress and measure success.

But another lesson we learned was that startups approach planning in a
completely different way than most big companies, including us. Before they
spend a lot of money, commit to a big deal, or hire a bunch of people, they get
some real, tangible results—actual sales, real users, a few customer contracts
signed and so on, then they plan based on real results—what actually happened
in the market.

4. Use minimum
viable products to learn.

Startups use “minimum viable products” to quickly test assumptions and
learn. A minimum product is like a three-legged chair; it’s so minimal that it
doesn’t help prove anything. “Viable” products are finished—fully designed and
executed—with no room for exploration. A minimum viable product is the fastest,
cheapest thing the founders can create that will help them learn and deliver
value to the end user or customer. Their goal is to quickly determine if they
can actually develop a solution that will sell.

This is very different from the normal product
development process used by most large companies. Most use what’s called a
“stage-gate” process for development. The stages go from idea generation, to
building a business case, to designing the product and then, finally, to testing
and launching in the market.

The biggest difference is that startups work almost exactly opposite.
They launch something in the market on day one and iterate based on learnings.
And then they do it over and over and over. They do this to de-risk their
business model continuously. This allows them to quickly understand what works
and doesn’t work based on realty. Less waste, more speed.

5. Focus on the
one metric that matters.

“Don’t sell what you
can make; make what you can sell.”

Lean Analytics, Alistari Croll & Benjamin Yoskovitz

That quote really
sums up how founders focus on figuring out what people need and want to buy.
But sometimes it can be very difficult to know what people want, especially for
startups. Often times a startup is not only trying to solve a problem that
doesn’t have a current solution but they are also trying to develop the market
around the solution. In these cases, there’s very little historical data or
experience to fall back on. That’s why startups and VCs use metrics as a way to
discuss challenges and opportunities.

Using data is not
new for Coca-Cola and most large companies. But the way successful startups
focus on data is. They focus on a single metric that’s incredibly important for
the step that they’re working on that hour, day or week. It’s the “one metric
that matters” most to moving forward. But you don’t have to be a startup to
realize the value in this. Using key performance indicators (KPIs) to measure
lots of stuff is valuable, but focusing on the one metric that is critical to
moving forward can create extreme focus and clarity for the whole team,
business unit or company.

Designing Irresistible Companies

David Butler

All the world’s
information and media is online. Mobile devices and cloud-based technologies
mean that almost anyone can reach anyone, anywhere at anytime. We’re using the Coca-Cola Founders platform as one
way to grow and remain relevant in a rapidly changing world. As we continue to build this platform, we don’t know what we don’t know and I’m sure we will
continue to learn a lot.

But our goal is not
to simply jump on the startup bandwagon or get into the “startup scene.” We
want to design what we have begun calling “irresistible companies.” Steve
Martin once said, “Be so good they can’t ignore you.” We think that through
this new model—connecting rock-star entrepreneurs with the “power” of Coca-Cola
from the start—we can create the kind of products and companies users,
customers, employees and investors simply can’t resist. That’s our goal.

David Butler is vice president of global innovation and entrepreneurship at Coca-Cola. Follow him on Twitter @DavidRButler.

The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, offering over 500 brands to people in more than 200 countries. Of our 21 billion-dollar brands, 19 are available in lower- or no-sugar options to help people moderate their consumption of added sugar. In addition to our namesake Coca-Cola drinks, some of our leading brands around the world include: AdeS soy-based beverages, Ayataka green tea, Dasani waters, Del Valle juices and nectars, Fanta, Georgia coffee, Gold Peak teas and coffees, Honest Tea, Minute Maid juices, Powerade sports drinks, Simply juices, smartwater, Sprite, vitaminwater, and Zico coconut water. At Coca-Cola, we’re serious about making positive contributions to the world. That starts with reducing sugar in our drinks and continuing to introduce new ones with added benefits. It also means continuously working to reduce our environmental impact, creating rewarding careers for our associates and bringing economic opportunity wherever we operate. Together with our bottling partners, we employ more than 700,000 people around the world.

The fairlife® brand is owned by fairlife, LLC, our joint venture with Select Milk Producers, Inc., and fairlife’s products are distributed by our Company and certain of our bottling partners.